MUMBAI (Reuters) - India's gold imports in January surged 23 percent from a year ago to their highest in 18 months as traders snapped up supplies ahead of a hike in duty, undermining the government's efforts to control a ballooning current account deficit.

The world's top bullion buyer imported 100 tonnes of gold last month, the head of the Bombay Bullion Association said on Friday. This is about 40 percent more than the country's average monthly imports last year.

"The total imports figure for 2012 was around 860 tonnes, so 100 tonnes in a month is too high. Also oil is trading firm above $95 (per barrel), so this will impact the oil import bill and overall deficit targets," said Navneet Damani, associate vice president with Motilal Oswal Commodities.

Alarmed by the mounting current account deficit that hit a record 5.4 percent of gross domestic product in July-September the government moved to rein in its gold imports -- second only to oil in value -- by raising the import duty on the precious metal to 6 percent from 4 percent on January 21.

"So many people imported and dumped gold after rumours from the first week of January of an import duty hike. People waited for the duty to increase and earn more profits," said Mohit Kamboj, president of the Bombay Bullion Association.

The government will announce its budget for the year beginning April 1, 2013 on February 28 and if gold imports continue apace, traders are concerned New Delhi may take further action to curb demand.

The Reserve Bank of India has indicated it could limit gold imports by banks, which corner about 60 percent of the supply, if the deficit remains at 5.5-6 percent of GDP for the next three to four quarters.

Given India's passion for the precious metal, traders and industry experts expect any impact from the January 21 duty hike to be short term. They see imports tapering off in February and March and the bearish mood lifting after that.

Gold is considered a sign of wealth and good fortune, and is traditionally given at weddings and festivals in India.

Demand could be as much as 965 tonnes in 2013, the World Gold Council said on Thursday, without giving an estimate for imports. In 2012, imports accounted for virtually all the demand of 864 tonnes at 860 tonnes -- down 11.25 percent from a year ago, partly as a result of a previous tax hike.

Spot gold prices have gained for the last 12 years and its attraction, while Indian inflation continues to eat into returns from other investments, remains high.

If prices do not rise any more in the next two to three months, buying will re-emerge, said Daman Prakash Rathod, director with Chennai-based MNC Bullion.

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